Taking a Look at Livestock and Poultry Trends

By P. Scott Shearer, Bockorny Group, Washington, DC | May 23, 2014

There are common trends in the meat and poultry industries that have shaped the markets in recent years, according to USDA Chief Economist Joe Glauber. These trends were presented during testimony at the recent House Agriculture Livestock Subcommittee’s hearing on the “State of the Livestock Industry.” The trends include:

· Feed Costs: Since 2007, feed costs have increased to record highs in 2007/08, 2010/11 and 2012/13, raising feed costs and reducing operating margins. Feed costs as a percent of total cash receipts average over 33 percent over 2007-13, compared to less than 25 percent over 2000-06.

· High Feed Costs & Poor Pasture Conditions: Feed ratios for hogs, cattle, broiler and layer operations declined sharply in 2007 and remained at low levels through mid-2013. Low feed ratios and the lingering drought in the southern plains has affected cattle production. Poor margins over the last three years have limited expansion for hogs and contributed to further contraction in the cattle sector.

· Lower Meat Production & Increased Net Exports: Since 2007, lower meat production and increased net exports have resulted in higher consumer prices and lower per capita consumption in the U.S. Annual average consumption of red meats and poultry has declined from 222 lb. per capita in 2004, to less than 204 lb. in 2013. Part of this reduction is a result of the slowdown in the economy that began in 2007. USDA is forecasting an increase in per capita consumption of red meats and poultry to reach 215 lb. by 2023.

· Consumption Patterns Have Changed Over the Past 40 Years: Consumption of food prepared away from home plays an increasingly large role in the American diet. In 1970, 25.9 percent of all food spending was on food away from home; by 2012, that share rose to its highest level of 43.1 percent. Almost 40 percent of beef and 42 percent of chicken is consumed away from the home.

· Exports Account for an Increasing Share of Total Demand: Twenty-five years ago, exports of red meats, poultry, and eggs accounted for less than 5 percent of total production. Over the past five-years, exports have averaged 21.5 percent for pork; 9.7 percent for beef; 19.4 percent for chicken; 12.5 percent for turkey; and 3.9 percent for eggs.

· Contracting a Major Feature of Livestock and Poultry Production: Contracting is a major feature of U.S. agriculture. In 2008, contracts covered nearly 90 percent of poultry and egg production, over two-thirds of hog production and almost 30 percent of cattle production.

These trends have resulted in various policy proposals to be considered by Congress over the past 10 years including concentration, packer-ban, GIPSA, country-of-origin labeling (COOL), trade, etc.